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[2009] ZALCD 30
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Richards v Umngeni Water Board (D669/03) [2009] ZALCD 30 (26 October 2009)
CASE
NO:
D669/03
DELIVERED:
4
NOVEMBER 2009
REPORTABLE
In
the matter between
W
N
RICHARDS
APPLICANT
and
UMGENI
WATER
BOARD
RESPONDENT
JUDGMENT
26
OCTOBER 2009
PILLAY
D, J
In this claim for
unfair retrenchment the applicant employee claims procedural
unfairness on the grounds that the respondent employer
Umgeni Water
(UW) omitted to notify him of its intention to restructure its
business and retrench its employees. He also claims
substantive
unfairness on the ground that he should not have been selected for
retrenchment given his exceptional knowledge, qualifications
and
expertise.
The
employee specialised in water science and management of water
services. The employer recruited him in 1984 from Scotland
to
be its first Chief Chemist. In 1988, he held the position of Director
of Scientific Services of UW.
In
1993 the parties concluded fresh contracts of employment. The
object was to secure the services of six UW senior executives
who
were eligible to retire immediately, and to facilitate affirmative
action.
The
material terms of the contract relevant to this dispute were that the
executives had to resign and be immediately reemployed.
They were
credited with pension for several years of service. In the
employee’s case he was credited with 10 years
service.
In these proceedings, the parties could not agree as to what amount
this translated to, the employee alleging that
it was half a million
rand, and the employer claiming that it was R1 million.
Either way, it was a substantial amount
of money paid pre-emptively
in 1993.
The
employer undertook to employ the executives in the same capacity for
at least two years. Thereafter, their employment
could be
terminated on six months written notice by either party.
In
1997 the employee was tasked with establishing Umgeni Water Services
(Pty) Limited (UWS), a commercial subsidiary of UW and in
1999, to be
its Managing Director.
In
June 2000 UM acquired a new Chief Executive Officer,
Cromet Molepo, who brought UWS under Umgeni Water Enterprises,
a
division of UM. A month later, the employee became General Manager of
Environmental and Laboratory Services in Umgeni Water Enterprises.
In
2001 the employee was seconded to the University of Natal’s
School of Business to establish its MBA in its Water Management
Programme and to remain as a director of the programme until December
2002.
However,
in October 2001 the employee received a notice that his contract
of employment would not be renewed beyond 2001.
Following a
grievance hearing the employer, now represented by Acting Chief
Executive Officer Mshengu, reinstated his contract
of employment.
In
April 2002 Gugu Moloi became UW’s new Chief Executive
Officer. She too set about restructuring UW.
Barely six weeks after taking up her appointment Moloi notified the
employee that his employment would be terminated in December 2002.
Moloi gave no reasons for the termination.
[1]
Although
the letter was dated 13 May 2002, the employee received it
only on 7 July 2002. The employee
referred a
dismissal dispute to the Commission for Conciliation, Mediation and
Arbitration (CCMA), which resulted in UW withdrawing
the dismissal
notice in September 2002.
On
26 September 2002 the management of UW met the employee to
discuss his future. They resolved that the employee
would apply
for a new post created in the process of restructuring. If he
was not appointed to one of the posts he would
be retrenched and
compensated.
[2]
On
8 October 2002 the employee applied for three posts.
He was short listed for one post only. He was unsuccessful
and
retrenched on 2 April 2003.
Procedural
Unfairness
Mr Seggie
submitted that the Court is precluded from determining the procedural
fairness of the dismissal as the retrenchment
was in terms of
section 189(A) Labour Relations Act No. 66 of 1995 (the LRA).
Under sub-section (18) an employee must
challenge procedural fairness
by way of an interdict while the process is under way.
Thereafter, he loses the opportunity
to contest procedural fairness.
So submitted Mr Seggie.
The
employee denied knowing that any retrenchment was underway at all,
let alone one that was in terms of section 189(A).
After a
CCMA commissioner declined jurisdiction on the grounds that the
retrenchment was a group dismissal involving possibly 200
employees,
the employee became aware that section 189(A) might apply.
He disputed that it did apply because section 189(A)
came into
effect on 1 August 2002, after UW contemplated
restructuring and retrenchment. Furthermore, even if
section 189(A) did apply retrospectively, the number of persons
to be dismissed did not meet the minimum prescribed in section
(189)(A)(1).
An
employer who relies on section 189(A) to resist challenges to
the procedural fairness of its retrenchments must meet all
the
requirements prescribed in that section. These include written
notice to the employee that it contemplates retrenching
in terms of
section 189(A). The notice should also inform the employee
of the number of employees affected.
Implicit
in the meaning of “notice” is that it must precede
implementation. Naturally therefore, as section 189(A) came
into
effect after the employer implemented its restructuring, it cannot be
valid notice.
Furthermore,
section 189(A) cannot apply retrospectively; there is a
presumption against retrospectivity. The effect of the
retrospective
application in these circumstances would be to deny the employee of
an existing right to challenge procedural fairness
in an action for
unfair retrenchment. Retrospective application of legislation which
has such an effect is obviously unfair and
impermissible.
When
UW purportedly gave notice of the contemplated retrenchment to the
unions and to the employees, the employee was based at the
university. He testified that he was not aware of the
restructuring. Mr Seggie for UW insisted that he must have known
of the retrenchment because it was widely discussed in
Pietermaritzburg.
At a
meeting with the employee on 27 November 2002, and in the presence of
Moloi, Colin Heads the attorney who assisted the employer
with the
retrenchment, conceded that because the employee had been seconded to
the University, he was not notified of the restructuring.
[3]
Even if the Court were to accept Mr Seggie’s submission
that the employee might have known that retrenchments
were underway
at UW; he would not have known that he was affected. UW
produced no evidence of having notified the employee
in terms of
section 189(3), section 189(A) or in any other way, of the
pending retrenchments.
The
Court finds that the employer gave no notice whatsoever to the
employee or anyone purportedly mandated by him. The employer
therefore cannot seek refuge behind subsection (18) to resist the
claim for procedural unfairness.
Even
if section 189(A) applied, the Court finds that UW did not
comply with it. It was not an exhibit. Furthermore, from the
available evidence, the number of employees affected varied from
100
[4]
, 200
[5]
,
300
[6]
and 393
[7]
.
The
finding of the CCMA that the retrenchment was a group dismissal was
made in the context of determining the CCMA’s jurisdiction.
This Court’s inquiry is a different one aimed at establishing
whether UW can invoke section 189(A) to resist a claim
for
procedural unfairness. The CCMA ruling therefore has no impact on
this Court’s discretion to entertain the claim for
procedural
unfairness.
Once
UW became aware that it had not notified the employee of the pending
restructuring it conceded that it was an oversight. The
oversight was
material in this instance. UW’s attempts to rescue itself from
a procedurally unfair retrenchment were contrived
and unconvincing.
Consultations
with him were triggered by the employee challenging in the CCMA
Moloi’s decision to dismiss him on notice. At
the first
consultation which occurred on 26 September 2002 the
employer did not disclose any of the critical information
to either
justify retrenchment or the steps it took or intended to take to
avoid the retrenchment. Moloi merely asked the employee
what he
wanted. When he said that he wanted to be reinstated or paid up to
age 60 years, Moloi replied that there were no positions
at executive
level.
When
the employee agreed to apply for the advertised posts in those
circumstances, he had no alternative. The method of restructuring
had
already been decided and implemented; the posts were advertised two
weeks later in the Sunday Times on 6 October 2002.
He
was hardly in a position to reverse the process.
Advertising
the posts externally in the Sunday Times also made no sense if the
compelling purpose of the restructuring was the need
to contain costs
and to reduce the deficit. An external advertisement would have
attracted external candidates. Replacing an internal
candidate with
an external candidate would have escalated costs as severance would
have had to be paid to the internal candidate.
It could have resulted
in a cost saving if the severance pay was off-set by a lower rate of
remuneration for the new incumbent.
However, that would not been fair
to the employee unless he was invited to remain in employment at the
lower rate. Therefore, in
so far as the external advertising and
filling of posts was the method by which the employer intended to
restructure the business,
it was a fatally flawed and an irrational
way of reducing the deficit.
If the
purpose compelling the restructuring was the transformation of the
demographics of the organisation, that was not stated
either during
the consultations with the employee or advanced during the trial. The
employer had acquired the right in the 1993
contract to dismiss the
employee on six months notice in order to implement affirmative
action. It did not have to subject the
employee to a retrenchment
charade.
Another
reason why the failure to notify the employee of the contemplated
restructuring and to elicit his participation from the
outset is a
material procedural irregularity is that as a long serving
experienced executive, the employee could have made a valuable
contribution if he had notice of the restructuring and retrenchment
before these decisions were taken. Even if he did not favour
affirmative action - and the Court makes no finding in this regard -
his technical competence coupled with his managerial experience
added
a voice that should have been heard.
Despite
the obvious omission and concession that it was an oversight, UW
persisted throughout the pre-dismissal discussions and
in this trial
that the employee was aware of the consultative forum that it had
established to elicit stakeholder participation
in the restructuring
and that Bongi Mshengu, the human resources director, had
represented the executives.
The
employee denied ever giving a mandate to Mshengu. He was not
aware that Mshengu had been tasked with representing the
executives.
Mshengu was not called to testify that he had a mandate from the
employee. None of the employer’s witnesses could
adequately
refute the employee’s evidence that Mshengu neither obtained a
mandate from the employee nor represented him at
the consultations.
The
Court is satisfied that the employee was not represented at the
consultative forum. To suggest that he was consulted through
Mshengu participating at the consultative forum is nothing short of
cynicism.
In the
circumstances, UW has failed to comply with the procedural
requirements for a fair retrenchment.
Substantive
Fairness
Moloi
took over at a time when UW was in dire straits financially.
Furthermore, the trade union Nehawu challenged the management
on
several issues, including corruption and transformation.
Transformation was therefore high on the agenda. The Court accepts
without deciding that the employer had to restructure to reduce its
deficit and to transform the enterprise. However, the procedure
it
adopted of advertising and filling posts contaminated the substantive
outcome.
Although
the employee applied for three posts he was short listed for only one
post. UW led no evidence as to why he was not
short listed for
the other two posts. Finding him unsuitable for the position of
General Manager: South Africa, the consultancy
that undertook the
appointment process for the UW, issued the following reasons:
“
Regrettably,
your application was not successful, specifically as a result of the
requirements for the relevant experienced candidate
and/or those with
specific potential to operate at the executive level within a
reasonable period, having regard to the operational
requirement of
Umgeni Water.”
[8]
The
reasons given are nonsensical in the context of the employee’s
extensive technical and managerial experience. Apart
from its
vagueness, it appears to be cut and pasted from a standard response
reserved for an aspiring executive. The employee
was already an
executive.
The
successful incumbent, a white woman, was preferred mainly because, as
a member of Black Sash, she had good relations with stakeholders.
Her technical experience and expertise were inferior to the employee.
It also appears that she was an external candidate.
However,
the stated purpose of the restructuring and retrenchment was to
enable UW to rescue itself from dire financial straits
and to render
it financially viable. If the purpose was to facilitate
affirmative action the employee should not have been
subjected to the
façade of having to apply for a post he was destined not to
fill.
This
was UW’s third attempt in as many years to dismiss the
employee. The Court finds that the reasons for his non appointment
and consequent retrenchment are manifestly a sham.
Remedy
The
employee is past the retirement age of 60. In terms of his 1993
contract of employment he had no right to employment beyond
two
years. UW could have dismissed him on six months notice.
The third notice of dismissal was as defective as the
earlier two
because they did not give the employee six months notice.
In
terms of the 1993 agreement he could have had no expectation of more
than six months notice after the two years had expired.
The
pre-emptive payment was a quid pro quo for dismissal on notice
precisely because the objective was to facilitate affirmative
action.
Subsequent
to his dismissal the employee worked part time as a non executive
board member of the Lesotho Highlands Development
Authority between
March 2003 and April 2004. He also secured a contract as
Director, South Australia Water Centre for Water
Science and Systems
at the University of South Australia between 22 August 2004
and 22 April 2005. In addition,
he received a substantial
payout in 1993.
UM
is a publicly funded utility. Any award will hit at the pockets
of taxpayers. Ideally, some of the management should
make good
this claim for violating the employee’s rights; however, they
are no longer employed at UW. Besides, this
was not a remedy
that the Court canvassed with the parties.
However,
the Court did record its displeasure, particularly in way UW and its
representatives conducted its defence. Its pre-trial
preparation was appalling. The trial was especially scheduled
for one week during the October recess. It ran over both
weeks
of the recess. Almost on a daily basis UW introduced new
bundles of documents.
Furthermore,
without material documentary evidence such as a notice in terms of
section 198(A) and the records of the employee’s
application
for the three posts, and without crucial witnesses such as Mr
Mshengu, the employee’s purported representative
at the
consultative forum and Ms Moloi, who dismissed him, the employer and
its legal representatives should have known that it
could not
overcome the onus of proving the fairness of the dismissal. If it had
prepared for trial soon after the dismissal it
might have gathered
the material timeously and been better prepared to discharge its
onus.
Even
at the start of the trial, the employer should have realised the
weaknesses in its case. It persisted doggedly to flog a dead
horse
over not one but two weeks. A better course of action would
have been to concede the procedural and substantive unfairness
and to
ask the Court to determine the appropriate remedy. As much of the
evidence relevant to the remedy was common cause, the
dispute could
have been disposed off in a day after hearing argument.
To
mark its displeasure the Court considered a special order for costs.
A punitive cost order also means burdening the taxpayer.
Furthermore,
it would not hit at the persons responsible for wasting public
resources, namely the legal representatives and various
members of
management. It is also hard to say to what extent UW staff impaired
trial preparations and frustrated the efforts of
the lawyers.
Otherwise, the Court would be inclined to deprive the legal
representatives of all or some of their costs.
In
the circumstances the Court makes no special order for costs.
THE
ORDER THE COURT GRANTS IS THE FOLLOWING
:
a.
The dismissal of the employee was
procedurally and substantively unfair.
b.
The employee is awarded compensation being
the equivalent of six (6) months’ remuneration.
c.
The employer is directed to pay the
employee’s costs.
PILLAY
D, J
IN
THE KWAZULU-NATAL LABOUR COURT, DURBAN REPUBLIC OF SOUTH AFRICA
CASE
NO
:
D669/03
DATE
:
26 OCTOBER 2009
W
N RICHARDS
versus
UMGENI
WATER
BEFORE
THE HONOURABLE MADAM JUSTICE PILLAY
ON
BEHALF OF PLAINTIFF
:
ADV C J HARTZENBERG SC
ON
BEHALF OF DEFENDANT
:
ADV R J SEGGIE SC
INTERPRETER
:
NOT REQUIRED
EXTRACT
Judgment
CONTRACTOR
Sneller
Recordings
(Pty) Ltd. Durban
–
103 Jan Hofmeyr Road
–
Westville 3630
Tel
031 2665452
–
Fax
031 2665459
[1]
A171
[2]
A180
[3]
A200
[4]
Evidence
of Cyprian Sandile Dlamini
[5]
CCMA
Ruling – Exhibit K
[6]
Evidence
of Richard Themba Mthembu
[7]
A294-296
a cost benefit analysis prepared after 13 March 2003
[8]
A194